Peso moves lower as Obrador is set to become next Mexican president

Summary:

• Andres Manuel Lopez Obrador is said to have won Mexican presidential elections

• “Together We Will Make History” coalition claims clear victory in Chamber of Deputies

• USDMXN erased its initial downward move and is trading above the 20.00 handle

The general elections in Mexico were held on Sunday. The votes are still being counted yet it looks like Andres Manuel Lopez Obrador will become the next Mexican president. Moreover, the “Together We Will Make History” coalition that backs Obrador has secured a governing majority within the Chamber of Deputies. In response to this revelations the Mexican peso trades lower against the greenback on the day.

Before we move to the more detailed analysis of the elections outcome it is worth to pay some attention to the elections themselves. First of all, it needs to be noted that this elections were the biggest in the Mexico’s history. Mexicans voted not only for the president but also for almost 3500 other posts at local, state or federal level. Moreover, Mexico has been experiencing problems with drug cartels for many years and sadly, domestic druglords did not omit the chance to show their disappointment with programmes of some candidates. The campaign running up to this election resulted in numerous gang-related accidents with almost 140 politicians or political operatives losing their lives. In turn some of the candidates resigned prior to the ballot.

According to the latest reports, Andres Manuel Lopez Obrador has outperformed its competitors claiming a clear victory in the Mexican presidential elections. Source: XTB Research, New York Times

Moving onto the outcome of the presidential elections it looks like the former Mexico city mayor Andres Manuel Lopez Obrador (AMLO) easily outperformed other candidates. According to the half of the votes that have already been counted AMLO was backed by almost 54% of the voters. Ricardo Anaya who is said to have won second biggest backing got less than a half of that (around 23%). Jose Antonio Meade and Jaime Rodriguez Calderon, who were next in line, won 15.4% and 5.6% respectively, according to the reports. Margarita Zavala, wife of the former president Felipe Calderon, was backed by just 0.1% of voters.

Initial reaction to the exit polls suggested the Obrador’s victory was MXN-positive and  caused USDMXN to retreat from 19.95 towards 19.40. However, as investors began to digest the results the pair moved higher to trade above its pre-weekend levels. Source: xStation5  

Despite just half of the votes has been counted two main competitors to Obrador, Anaya and Meade, have already conceded and recognized his triumph. This is especially important as Obrador will be the first Mexican president since 1929 that does not come from either PAN or PRI party (parties of Anaya and Meade). Having said that we can move to the programme of the newly elected president. During the campaign Obrador took a more anti-establishment and populist approach vowing to combat corruption, take actions on the ongoing war with drug cartels or reduce poverty and inequality. Moreover, AMLO declared he wants to maintain a “friendly” relationship with the US. When asked about the migration crisis Obrador stated that under his rule “anyone who migrates from Mexico will do so because they want to, not because they have to”.

Taking a look at the USDMXN from the broader perspective we can see that in response to the election results the pair rebounded from the long term support zone ranging between 19.40 and 19.90. Do notice long wicks of this and previous weeks’ candlesticks suggesting bulls are still looming in the vicinity of the 50% Fibo level of last major downward impulse. Source: xStation5

When it comes to the parliamentary elections the situation is even more clearer as all the votes have already been counted. The “Together We Will Make History” coalition, consisting of National Regeneration Movement, Social Encounter Party and the Labor Party, has delivered a clear victory winning as much as 213 of 300 Chamber of Deputies’ seats that were offered in elections. As this is a coalition backing Obrador we will most likely see new government working towards the plan proposed by AMLO. Some commentators claim that such an outcome of the elections may not bode well for the Mexican economy as the implementation of the Obrador’s plan (i.e. increasing social spending and curbing the ongoing privatization) may result in turning Mexico into next Venezuela.